KIKKEI Asian Review – January 7, 2018 – WASHINGTON (Kyodo) — The World Bank slashed its growth forecast on Wednesday for the world economy as a whole as well as for developed countries such as the United States and Japan, citing impacts from a continued slowdown in emerging markets including China.
In its latest semiannual Global Economic Prospects report, the Washington-based multinational lender expects the global economy to grow 2.9 percent for this year in terms of real gross domestic product, down 0.4 percentage point from a projection it released in June last year.
Kaushik Basu, chief economist of the World Bank, warned the global economy could face the risk of further deceleration if the growth of major economies such as China and Russia falls short of the current estimates due to unexpected factors.
“Disappointing growth again in the largest emerging markets, if combined with new financial stress, could sharply reduce global growth in 2016,” Basu said.
The bank cut its growth rate projection for Japan for this year by 0.4 point to 1.3 percent from the June forecast, citing weakness of consumer spending-led domestic demand and exports. In 2017, the growth pace will slow to 0.9 percent, down 0.3 point from the earlier estimate, it said.
“Sustained policy accommodation, and the prospect of higher earnings and record low unemployment, are positives for the outlook,” the report said, adding, however, “The recovery remains fragile and dominated by downside risks.”
The bank expected the U.S. economy to expand 2.7 percent in 2016, down 0.1 point from the June forecast, and an unchanged 2.4 percent in 2017 on the back of improved labor markets and solid personal spending.
The Chinese economy is projected to grow 6.7 percent in 2016 and 6.5 percent in 2017 but the rate projection was slashed by 0.3 point and 0.4 point from the June report, respectively.
“A continued rebalancing from industry to services should support the shift from investment to consumption,” the report said, referring to Beijing’s efforts to push economic structural reforms.
The bank drastically cut the already severe forecast for the Russian economy which has felt the impacts of falling oil prices and economic sanctions from the United States and Europe following the contentious annexation of Crimea, southern Ukraine, in 2014.